MLI505 Law and Ethics Assignment Sample

Introduction - MLI505 Law and Ethics Assignment

Law is the rules and regulations which companies and the general public need to follow to run their business. Also, ethics are the standard values and principles that need to be followed by the public, society and the companies. These principles judge what is wrong and what is right and accordingly the decisions are taken. In the current case study, three friends have started that business d Authentic Info Pty Ltd. It includes the involvement of many different people and the study will outline the breach of duties made by some of the directors. Moreover, the study will also evaluate the fact that whether the company is responsible for paying the loan or not.

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MAIN BODY

Breach of common and statutory law as duties of director for Amy

Issue

The current situation includes the fact that at the time when capital was required, Mark a friend of Connor invested in the company a sum of $150000 and made Amy his wife the director for looking at the investment. However, Amy did not have any knowledge relating to the IT business and also she was studying for a CPA and was very focused on her studies (Villiers, 2023). As a result at every monthly meeting, she didn’t come stating that she was busy in her lectures. Also, in the meeting which was mandatory to be attended twice a year, she did not have to say anything and she just agreed to all the things which are proposed by others.

Rule

In the case of Amy, the Corporations Act 2001 is applicable as the three partners have formulated the company. By default, the company's act will be applicable in the current case of the company. Along with this another law which is applicable within the present case is the Common law. It is necessary to be applied within the current case as the contract is also breached.

Application

According to the Corporations Act 2001, there are different types of duties which need to be followed by the directors. Even in case they are not actively participating in the company then also they have to perform their duties well (Islam et al, 2022). The Corporations Act 2001 states that the general duties of a director include acting within the power, promoting the success of the company, exercising independent judgement, exercising due diligence, reasonable care, avoiding conflict of interest, not accepting benefits from third parties and many other different duties (General Duties of Directors - Corporations Act 2001 (Cth), 2024). But in the case of Amy, any such kind of right or duty is not fulfilled by her. Also, other than two meetings she has not even attended any of the meetings which is not good. Hence, in the present case, it is visible that there is a breach of the Company Act and for this, the penalty must be charged against Amy. Along with this at the time of the contract between the company and Amy as well certain types of obligations would have been signed. But Amy has also not fulfilled the same and has also breached the contract duties and obligations are not fulfilled. For the treatment either, Amy must be removed from the position of director or some legal action must be taken against her so that she performs her duty well.

Conclusion

In the end, it is concluded that the company must time to time review the fact that all the legal obligations and duties are fulfilled by the directors (Parker et al, 2024). Also, the effective tracking of the duties must be made so that successful working can be ensured and proper application of the law can be enforced.

The company paying the loan or the bank needs to enforce the loan

Issue

In the second situation, Gus who is the finance director of the company has taken a loan on behalf of the company which amounted to a total of $300,000. Within the company preamble, it was mentioned that in case any of the loans is taken above $150,000 then there must be proper approval need to be taken from the board of directors and Connor as well (Uddin, Chowdhury and Kabir, 2024).

Rule

The rule applicable to the current case is the Common Law. It is applied in the current situation of Gus because he would have taken permission and approval from the other directors as well. In addition to this, the Company Act 2006 is also applicable to the present case as all the decisions had to be taken with mutual understanding and by analysing the majority of the agreements on the topic (Del Villar et al, 2021).

Application

The Common Law is applied in the current situation because Gus has breached the contract and before deciding on the loan amount, he must have discussed it with the remaining directors as well (Morton et al, 2022). It is necessary because all three partners are equally responsible and also within the contract of the company it is mentioned that any loan above a specific amount needs to be approved by every director present. But Gus has not fulfilled this obligation and for this, the compliance with the breach of Common Law is made. It is due to the reason that when the Common Law would have been effectively followed then this issue would not have occurred and consequently the overall company would have been working in a better and more effective way (Haines and Macdonald, 2021). In addition to this, the company has to repay the loan because the loan has been done in the company’s and the bank will recover the loan amount from the company. The bank will not see whether Gus has taken the approval of the other directors or not. So for this, other directors may ask, Gus to repay the loan as it will not be the responsibility of all the directors or the company to pay the loan.

Conclusion

At last, it is concluded that complying with the Common Law and Company Act must be present. In case these laws will not be applied by Authentic Info Pty Ltd then the working of the company will be improved. Hence it is the obligation of the company that they must effectively try to comply with the legal guidance provided by both these laws.

Breach of common or statutory duties on behalf of Katijah

Issue

Now the issue comes with Katijah who has also breached the common and statutory duties towards both the company and the other directors as well. The cost of IT contractors was increasing and Katijah had a friend who could provide cheap IT materials and for this, around $80,000 would be saved. At the board meeting, for deciding the IT contractor, Katijha recommended that she research 5 different companies and ITS pty ltd was the best and the cheapest so she would recommend selecting that (McGaughey et al, 2022). But in actuality, Katijha has not researched at all and as the owner of ITS Pty Ltd is her friend she recommended to the other two directors. Whereas believing her the other two directors also agreed and gave the contract to her. Katijha has breached the contract as firstly she has not revealed that the owner of ITS Pty Ltd is her friend and also she lied that she had researched the 5 companies.

Rule

Compliance with the Common Law is made in the particular situation. It is due to the reason that Katijha has worked unfairly and also the ethical working is breached (Yang, Le Luo and Bhattacharyya, 2021). In the current case, the honesty and transparency principles are also breached which is not at all good for the company and its operation. Due to the lie, the company had to bear the additional cost of $45000 for fixing the mistakes made by using the inexperienced staff. Along with this, the statutory duty according to the Corporations Act 2001 has also not been fulfilled well. According to this act, it is the duty of the director that they must not accept the benefits from the third parties (Richards, Ahmed and Bruce, 2022). But in the present case, Katijha has also taken a round trip of $18000 from her friend the owner of ITS Pty Ltd which is not known to the other two directors that is Gus and Connor.

Application

Hence, with this, it is clear that the Common Law and the Companies Act must be followed effectively so that the overall development of the company takes place. According to the duty provided in the Corporations Act 2001, the duty mentions that any of the persons must not accept any of the benefits which are provided by the third party. So by applying this duty, the directors can file a charge against Katijha for breaching this duty (Baum and Solomon, 2021). Along with this in the contract, it was mentioned that for every decision consent of all the directors needs to be present but Katijha lied to others and as a result, the problem was faced by the company. Also, for this, the directors can claim the charges from Katijha as she was at fault and also the financial claims can be made from her. It is due to the reason that because she breached the contract the company had to face the issue of financial loss of $45000.

Conclusion

At last, it is concluded that it is the responsibility of the company that they must work with due diligence and honesty. Also, different ethical practices must be followed so that the overall development of the company can take place well.

In case the directors are guilty then the company can claim back from the director

Issue

In the current case of Authentic Info Pty Ltd, all the directors have breached that contract and the company law in some or the other manner. Thus, now the issue arises whether the company can claim back from the three directors or not. It is due to the reason that according to the company law, both the company and directors are separate and in case the director is not fulfilling their duties well then the company can sue the director as well (Halkos and Nomikos, 2021). In the current situation, all three directors have made some or the other breach of duty and as a result of this, all are liable for fulfilling the damages.

Rule

Here the rule applicable is the Corporation Act 2001 as all companies have to follow the guidelines provided within this act. This is the act which governs the working of companies present in Australia. By referring to the case of ASIC V Holista Colltech Ltd [2024] it was seen that the ASIC made use of the liability of the director and company differently by lifting the corporate veil (Federal Court decision pierces the corporate veil for breach of director duties, 2024).

Application

According to the Corporation Act, of 2001, in case the director breaches the contractual obligations and duties then there are different measures which the company can charge against the directors. The most common type of consequence of breaching the duty by the director. According to this law, the contravention of the duty of good faith is punishable and for this, there is an imprisonment of 15 years according to the S184 (General duties of directors, 2021). In addition to this substantial fines may also be charged and as a result, the directors have to pay for it. Along with this, when the director does not provide for the needed claims then the disqualification of the director can also take place. Both the ASIC and also the court have a clear power to disqualify the director in case they are not successful in dealing with and fulfilling their duties.

Conclusion

At last, it can be concluded that the company can claim all the back from all three directors as they have breached their duties.

CONCLUSION

At last, it is concluded that law and ethics are very necessary to be implemented in the company. This is because of the reason that it will assist the company in managing the work well and correctly attaining the business objectives. The above study highlighted the breach of duties of directors and how it can be rectified according to the Corporation Act and the common law.

REFERENCES

Books and Journals

• Baum, I. and Solomon, D., 2021. The least uncomfortable choice: why delaware and England win the global corporate law race. SCL Rev., 73, p.387.
• Del Villar, K., Close, E., Hews, R., Willmott, L. and White, B.P., 2021. Voluntary Assisted Dying and the legality of using a telephone or internet service: The impact of Commonwealth'Carriage Service'offences. Monash UL Rev., 47, p.125.
• Haines, F. and Macdonald, K., 2021. Grappling with injustice: Corporate crime, multinational business and interrogation of law in context. Theoretical Criminology, 25(2), pp.284-303.
• Halkos, G.E. and Nomikos, S.N., 2021. Reviewing the status of corporate social responsibility (CSR) legal framework. Management of Environmental Quality: An International Journal, 32(4), pp.700-716.
• Islam, M.A., Cooper, B.J., Haque, S. and John Jones, M., 2022, January. Moral versus pragmatic legitimacy and corporate anti-bribery disclosure: evidence from Australia. In Accounting Forum (Vol. 46, No. 1, pp. 30-56). Routledge.
• McGaughey, F., Voss, H., Cullen, H. and Davis, M.C., 2022. Corporate responses to tackling modern slavery: a comparative analysis of Australia, France and the United Kingdom. Business and Human Rights Journal, 7(2), pp.249-270.’
• Morton, R., Hebart, M.L., Ankeny, R.A. and Whittaker, A.L., 2022. An investigation into ‘community expectations’ surrounding animal welfare law enforcement in Australia. Frontiers in Animal Science, 3, p.991042.
• Parker, C., Albarrán-Torres, C., Briggs, C., Burgess, J., Carah, N., Andrejevic, M., Angus, D. and Obeid, A., 2024. Addressing the accountability gap: gambling advertising and social media platform responsibilities. Addiction Research & Theory, 32(4), pp.312-318.
• Richards, D.W., Ahmed, A.D. and Bruce, K., 2022. Ethics in financial planning: Analysis of ombudsman decisions using codes of ethics and fiduciary duty standards. Australian Journal of Management, 47(3), pp.401-422.
• Uddin, M., Chowdhury, A. and Kabir, M.A., 2024. Legal and ethical aspects of deploying artificial intelligence in climate-smart agriculture. AI & SOCIETY, 39(1), pp.221-234.
• Villiers, C., 2023. A game of cat and mouse: Human rights protection and the problem of corporate law and power. Leiden Journal of International Law, 36(2), pp.415-438.
• Yang, H., Le Luo, L. and Bhattacharyya, A., 2021. Mandatory environmental reporting in Australia: An in‐depth analysis of quantity and quality. Abacus, 57(4), pp.737-779.

Author Bio

Nora Brooks   6 years | LPC

Hello students. I am Nora Brooks from London. I am a creative writer and working as an academic writer for 6 years. You can get assistance from me in your Law Papers and I will make sure you submit them on time. I pay attention to every detail provided by my students and I follow academic guidelines too.